Mozambique defaults on its debt

3 February 2017 by Jubilee Debt Campaign

Campaigners from Jubilee Debt Campaign protesting against Credit Suisse’s secret loans to Mozambique, outside their office in Canary Wharf, London

Mozambique’s secret loans crisis has entered a new phase after the government missed a payment on its debts. Can you take action now in solidarity with campaigners in Mozambique?

The country was thrown into crisis last year by the revelation that government officials had taken out $1.1 billion of secret loans via the London offices of two international banks, Credit Suisse and VTB, without the required approval of Mozambique’s parliament.

The President has since agreed to an external audit into the scandal, while the UK regulator is reportedly investigating the banks that arranged the loans. But campaigners in Mozambique now fear the IMF IMF
International Monetary Fund
Along with the World Bank, the IMF was founded on the day the Bretton Woods Agreements were signed. Its first mission was to support the new system of standard exchange rates.

When the Bretton Wood fixed rates system came to an end in 1971, the main function of the IMF became that of being both policeman and fireman for global capital: it acts as policeman when it enforces its Structural Adjustment Policies and as fireman when it steps in to help out governments in risk of defaulting on debt repayments.

As for the World Bank, a weighted voting system operates: depending on the amount paid as contribution by each member state. 85% of the votes is required to modify the IMF Charter (which means that the USA with 17,68% % of the votes has a de facto veto on any change).

The institution is dominated by five countries: the United States (16,74%), Japan (6,23%), Germany (5,81%), France (4,29%) and the UK (4,29%).
The other 183 member countries are divided into groups led by one country. The most important one (6,57% of the votes) is led by Belgium. The least important group of countries (1,55% of the votes) is led by Gabon and brings together African countries.
will give new loans to the country before those responsible have been held to account. If Mozambique uses the new IMF loans to pay off the secret debts, rather than refusing to pay on the grounds they are illegal, the secret lenders will be bailed out.

The UK is one of the major voices on the IMF Board, so we have a chance to show our solidarity with campaigners in Mozambique and demand the banks are held to account. Can you join our call for the UK not to support a bailout for Mozambique’s secret lenders?

The fall-out from the hidden loans scandal is already proving devastating for people in Mozambique. The debt crisis, on top of the sharp fall in commodity prices which has hit the country’s income from exports hard, has led to rampant inflation Inflation The cumulated rise of prices as a whole (e.g. a rise in the price of petroleum, eventually leading to a rise in salaries, then to the rise of other prices, etc.). Inflation implies a fall in the value of money since, as time goes by, larger sums are required to purchase particular items. This is the reason why corporate-driven policies seek to keep inflation down. in basic goods and cuts to essential public services. The burden of the crisis is falling on the poorest people in Mozambique.

Last year, when the scandal broke, we called on Credit Suisse and VTB to drop these secret debts. After many months of refusing to respond to our campaign, press reports now suggest that the banks have sold on some or all of the debts. And as the stand-off continues, the secret debts may be bought up by vulture funds Vulture funds
Vulture fund
Investment funds who buy, on the secondary markets and at a significant discount, bonds once emitted by countries that are having repayment difficulties, from investors who prefer to cut their losses and take what price they can get in order to unload the risk from their books. The Vulture Funds then pursue the issuing country for the full amount of the debt they have purchased, not hesitating to seek decisions before, usually, British or US courts where the law is favourable to creditors.
- financial speculators who look to profiteer from countries in debt crisis.

We recently paid a visit to Canary Wharf, where the secret loans were issued. We called on Credit Suisse to come clean about their role in the scandal, including by revealing who now owns the debts, how much they were sold for, and by publishing the due diligence they conducted before agreeing to the loans. So far they have failed to do so.

As the crisis enters this new phase, the best way to hold the lenders to account for this scandal is for Mozambique to refuse to pay. The Mozambique parliament never agreed the loans, in breach of the country’s constitution, so the government is well within its rights to refuse to pay - alongside prosecuting those responsible in Mozambique. Even The Economist has said that the country may be better off if it ‘repudiates’ the secret debts.

New IMF loans would make this less likely. They would change the balance Balance End of year statement of a company’s assets (what the company possesses) and liabilities (what it owes). In other words, the assets provide information about how the funds collected by the company have been used; and the liabilities, about the origins of those funds. of power in Mozambique’s stand-off with creditors, and could let both Mozambican officials and the reckless lenders off the hook. Please tell the UK: No bailout for Mozambique’s secret lenders.

Other articles in English by Jubilee Debt Campaign (39)

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